The USD/CAD pair faces downward pressure as the new week begins, retracing some of Friday’s robust gains that propelled it to the 1.3785 mark, its highest level since November 14. Presently, spot prices hover within the 1.3760-1.3755 range, with a notable corrective decline still elusive amidst prevailing bullish sentiment surrounding the US Dollar (USD).
Investor sentiment shifted as expectations for the Federal Reserve’s (Fed) first interest rate cut were pushed back from June to September. This adjustment follows last week’s US data release, indicating persistent inflationary pressures. Market consensus now anticipates fewer rate cuts in 2024 compared to the Fed’s initial projections, bolstering US Treasury bond yields and bolstering the USD Index (DXY) near its year-to-date peak. This trend is poised to support the USD/CAD pair.
Simultaneously, Crude Oil prices struggle to attract buyers despite heightened geopolitical tensions following Iran’s attack on Israel over the weekend. The potential for a broader regional conflict and its implications for Middle Eastern oil supply could undermine the commodity-linked Canadian Dollar (CAD), thereby limiting downward pressure on the USD/CAD pair. Consequently, any subsequent declines may be viewed as buying opportunities, with caution advised before confirming a near-term top in spot prices.
Attention now turns to the US economic calendar, featuring the release of monthly Retail Sales and the Empire State Manufacturing Index during the early North American session. Additionally, market participants will monitor Fedspeak and broader risk sentiment, alongside developments in oil prices, for short-term trading opportunities surrounding the USD/CAD pair.
